Correlation Between Caterpillar and Horizon Kinetics
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Horizon Kinetics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Caterpillar and Horizon Kinetics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Horizon Kinetics Inflation, you can compare the effects of market volatilities on Caterpillar and Horizon Kinetics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Caterpillar with a short position of Horizon Kinetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Horizon Kinetics.
Diversification Opportunities for Caterpillar and Horizon Kinetics
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and Horizon is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Horizon Kinetics Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Kinetics Inf and Caterpillar is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Caterpillar are associated (or correlated) with Horizon Kinetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Kinetics Inf has no effect on the direction of Caterpillar i.e., Caterpillar and Horizon Kinetics go up and down completely randomly.
Pair Corralation between Caterpillar and Horizon Kinetics
Considering the 90-day investment horizon Caterpillar is expected to generate 2.1 times less return on investment than Horizon Kinetics. In addition to that, Caterpillar is 2.18 times more volatile than Horizon Kinetics Inflation. It trades about 0.07 of its total potential returns per unit of risk. Horizon Kinetics Inflation is currently generating about 0.33 per unit of volatility. If you would invest 3,791 in Horizon Kinetics Inflation on August 26, 2024 and sell it today you would earn a total of 508.00 from holding Horizon Kinetics Inflation or generate 13.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Horizon Kinetics Inflation
Performance |
| Timeline |
| Caterpillar |
| Horizon Kinetics Inf |
Caterpillar and Horizon Kinetics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Horizon Kinetics
The main advantage of trading using opposite Caterpillar and Horizon Kinetics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Horizon Kinetics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Horizon Kinetics will offset losses from the drop in Horizon Kinetics' long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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